Finance minister Arun Jaitley. Union Budget 2018 probably the most challenging and important one for the primary steward of the Indian economy. Photo: Hindustan Times

On Friday, Parliament announced that the budget session will begin from 29 January and the Union budget will be presented on 1 February.

It set the stage for what would be finance minister Arun Jaitley’s fifth budget; technically his last, as the next one due just months before the scheduled date of the 17th general election will be a vote-on-account (where Parliament approves routine expenditure such that the government continues to run till a new regime is in place). And probably the most challenging and important one for the primary steward of the Indian economy.

Jaitley has the unenviable task of balancing economics with politics. And this time, the economics—prolonged farm distress and a delayed recovery in growth—is shaping the politics. The budget will have to posit solutions to address rural distress even though it is a fact that the structural problems of Indian agriculture can’t be fixed by mere policy interventions by the Union government; the thing is that in politics, inevitably it is not what you do, but what you are perceived to be doing that matters (Especially since sustained policy action to clean up the legacy of bad loans with banks the government inherited can be flipped by political rivals to argue how agriculture does not get equal attention from the Bharatiya Janata Party (BJP)-led National Democratic Alliance.

The just-concluded poll in Gujarat, where the BJP just about scrambled home, showed how vulnerable the party is to this political charge. At the same time, the BJP will be cognisant of the bruising electoral calendar ahead of it—eight states go to polls this year and the saffron party, not just because it is the new pole of Indian politics, has stakes in all of them (in three of them, it is the incumbent).

The message from the budget will be crucial in influencing the electoral message the BJP will like to project.

An additional cause of worry for the finance minister is rising oil price. In the last one year, it has risen 30%, in contrast to the first three years of the NDA regime when falling oil prices provided an unexpected boost to the economy.

Apart from this, the macroeconomic news is much better than the backdrop in which Jaitley presented his first budget. The inheritance from the United Progressive Alliance was nearly double-digit inflation and an anaemic growth trajectory. Going into his final budget, the FM should take heart (and solace) from the fact that the inflation demon has been tamed and that growth is showing faint signs of a recovery. The forecast of 6.5% growth for the current fiscal year may be a tad disappointing compared to the initial projection of 6.7%, but it is a fact that this is masking the nascent recovery that even bellwether indicators like the Purchasing Managers Index captured in the quarter ended December.

Yet, the FM must feel a twinge of disappointment at being unable to revive investment in the economy to the desired levels; a legacy issue (created largely by the vicious cycle of bad corporate debt) which got compounded by a sudden global slump and the economic disruptions triggered by a dose of structural reforms (like demonetization of high-value currencies and the roll-out of the goods and services tax) initiated by the NDA.

Regardless, some of the broad contours of this year’s budget can be safely anticipated. For one, after the roll-out of GST, one component of indirect taxes (a fairly big one at that) is now decided outside the budget.

In other words, the finance bill, the key document perused by all, will shrink both in terms of importance and sheer size (every year from now on). Second, as a result of the above, the focus will now be on expenditure. And in this, it will not just be aggregates, but also the quality of the proposed expenditure—especially its approach to resolving rural distress—that will matter.

In the final analysis, therefore, it is clear then that the focus of Jaitley’s last hurrah, in this tenure of the NDA, will be the ‘Big Spend’.

Anil Padmanabhan is executive editor of Mint and writes every week on the intersection of politics and economics. His Twitter handle is @capitalcalculus.